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Troubled water treatment firm Hyflux’s Board of Directors, through its founder and executive chairperson Olivia Lum, were grilled by the Securities Investors Association Singapore (SIAS) over her apparent lack of participation in restructuring efforts despite receiving a payment of more than S$60 million in dividends from her 34 per cent ordinary shareholding in the firm.
A statement by SIAS written on Friday (8 Feb) and published on Monday (11 Feb) read that Ms Lum had also "received significant salary, benefits and bonuses and earned between SGD750,000 and SGD1 million in 2017, a year in which Hyflux reported losses of SGD115.6 million".
Mr Gerald highlighted that during the same period, "Hyflux reported losses of S$115.6 million and a period which was five months prior to Hyflux Group filing for court protection from creditors and when Hyflux has been losing huge amounts of cash and building projects".
President and CEO of SIAS David Gerald questioned Ms Lum's role in the firm's restructuring efforts, as well as the reasons behind not contributing her gains from Hyflux Group to the restructuring process.
He also raised the question as to why the Board continued to pay dividends even "when the operating cash flow was negative and accumulate more debt during this time", on top of asking "how it was possible that despite the negative operating cash flow, Hyflux continued to report profits in each year" prior to FY2017.
Hyflux’s annual report indicated that the firm's top executives had received a total remuneration of S$2,695,134.20 in the 2017 financial year.
Hyflux's Tuaspring plant was also the subject of scrutiny by SIAS.
Tuaspring provides up to 318,500 m3 or 70 million gallons of desalinated water per day to Singapore’s water supply under a 25-year design-build-own-operate arrangement with PUB.
Citing a partially-funded shareholder loan of S$57 million, Mr Gerald raised the question as to how Hyflux had obtained funding for the loan to Tuaspring, as "Tuaspring has been loss-making since it commenced operations in 2015".
He also probed on the overvaluation of Tuaspring at S$1.4 billion for sale, which he claims has been proven to be "at least S$900 million" over its actual value.
He added that Hyflux has confirmed any bids received in the 2018 sale process for Tuaspring were for less than Maybank’s outstanding project finance debt of approximately S$500 million.
"What is the monthly cash burn at Tuaspring? What are Tuaspring’s current cash reserves? What is the current market value for the Tuaspring asset?" Mr Gerald asked.
While a multimillion-dollar lifeline was extended to Hyflux by SM Investments in the form of acquisition of 60 per cent of the firm's shares by Salim Group and Medco Group for S$400 million, in addition to a shareholder's loan of S$130 million, it remains a speculation as to whether Government agencies such as the Public Utilities Board and the National Environment Agency will approve the investment.
Earlier this month, Hyflux announced that it had obtained the approval of Maybank - its only secured lender - to further hold negotiations with the Malaysian bank regarding the divestment of the plant.
This marks the fifth time in which the deadline was postponed - until the 28th this month - for Hyflux to seal the deal with a successful bidder or investor for the purpose of acquiring the plant.